Coming down to the budget specifics, we would have to look into the past and the budget’s target elements one by one.
Railways: It’s the face of India. Going by sheer statistics, it carries an Australia as passengers in one particular day. It has generated 20,000 crores as profit in the previous year. That makes it the highest profit making company in the country. Why we do not realize the magnitude is just because its a government of India’s initiative. But it has received nothing short of widespread admiration and respect in the way it is administered and handled, from the entire world over.
State budgets: a chief minister today is an MD of a company, the company being the state. They look to generate profits, incomes, opportunities, all in the same way as any corporate does. The important trend which India exhibits today is a revolutionary change in mindsets of people, which transgresses borders of politics. What is the need of the day though is the nation wide integration of economic details, both state and the center.
It is a consolidation budget, which requires the finance minister not to do much, but just let the wind flow. No path breaking announcements were made in the budget. Small incremental changes were shown and indicated.
Year 2006 saw the maximum influx of FDI
The landmarks have to be the 2 outbound acquisitions , the two Indian companies made, the Tata’s and the Birla group. First time a company went ahead and spent 12 bn $ in the acquisition of a foreign major. This shows clearly the mind sets of people within and outside the country changing.
The growth rate has been pegged at 9% for this year. The question that stands amongst us today is, is the 9% growth sustainable and desirable in the face of a 7% inflation which we currently face.
According to Mr. Anand, any budget which is analyzed should be done so in the capacity of satisfying 3 S’s, being simplicity, stability and sustainability. The first two tests this current budget clearly passes. The trend towards stable economic policies is constant irrespective of which government comes in. The direction and motion is set for these.
When we come to the question of sustainability, there leaves a lot to be desired. With the lack of infrastructure, agricultural gains and education not growing as much as it should, the sustainability aspect leaves a lot to be desired.
The land available to farmers for agriculture has drastically gone down. The reason would be conversion of the farming land to real estate properties. This sector has seen a growth of only 2.3% which is miniscule and leaves a lot of open ended questions. As far as education is concerned, having different level of cess is not the need of the day. The need for education goes much beyond the money value of the same considered. This requires initiatives at much deeper grass root levels, and not the budget declarations.
Comparison with different developed and model economies of the world
There are a lot of lesson we can learn from the more developed economies of the world. The states, has a contribution of 43% in the GDP by the government’s initiatives. This is in stark contrast with the Indian government’s contribution of 17% in its GDP. The second thing which is important is to know that the structure is becoming irrelevant and the businesses are growing to be the main drivers in the economy.
A very important aspect which Mr. Anand talked about was the model of how people in New Zealand participate in their own budget. Their contributions and suggestions were carefully recorded. Then the people themselves form the people’s budget.
Moderation of taxes: The effective rate of taxes being very high is a fact which turns most people away from investing in India. Even though the tax rate is touted to be 30% odd, the effective rate after surcharges, cess etc makes the figure shoot up to 40-45%, a very high number compared to the other viable markets in the world. This figure needs to be controlled if we have a vision of making India as more attractive destination and hub for industries.
About 162 services and goods are covered under the services sector today, giving a revenue vision of 52,000 crores , and we have clearly moved from having three sectors : postal services, insurance and stock broking, generating a revenue of 400 crores back in 94-95. Today it contributes 55% to our GDP, which is at par with the other developed countries.
All said, the positive trends which are evident in the economy of India is, that even after the disposable income levels shooting up by the minute, we are very different as a nation from other countries. Our savings have climbed from 26 -32%. Now that might pose a problem for marketers, but saving for a rainy day always helps. We need to just strike that perfect balance between spending and saving.
We need to look in the future at tabbing inflation in a big way. Also, with the number of deals, equity inflow, investments etc, we need to be double careful in order to avoid any major financial scam. We have been luck in that regard, since around 92-93.proper checks in the system and a system for punishing the tax offenders are the call of the day. Mr .R. Anand’s infusion of humor with the serious issues helped make the session an enriching one for all those who attended the session. Students from the other departments were particularly enthusiastic about the Q and A session that we had and everyone took home a lot of knowledge and perspectives. A session put forward in the lightest way possible and standing the test of his first S, simplicity, made the session a thoroughly enjoyable one.
(MBA Batch of 2008)